Part 9 — Under­stand­ing Your DST Tax Pack­age

DST.EDU Spe­cial Series

Octo­ber 30, 2026

By Al DiNi­co­la, AIF®
Pri­vate Fund Advi­sor
DST 1031 Spe­cial­ist
Fidu­cia­ry Cap­i­tal Man­age­ment, LLC

What Investors and Their CPAs Need to Know About DST Tax Report­ing

Once the DST tax pack­age arrives, one ques­tion I hear often is very prac­ti­cal:

“What do I actu­al­ly send to my CPA?”

My answer is usu­al­ly sim­ple:

Start with the com­plete pack­age.

Investors some­times try to be help­ful by select­ing the one or two pages they think mat­ter and leav­ing the rest out. With a DST, that can cre­ate more work for the tax pro­fes­sion­al rather than less.

The spon­sor is pro­vid­ing tax infor­ma­tion. Your CPA is the per­son who deter­mines how that infor­ma­tion applies to your indi­vid­ual tax return.

Here’s the impor­tant part: your job is pri­mar­i­ly good record­keep­ing and a com­plete hand­off.

How Schedule E Fits Into the Picture

For an indi­vid­ual tax­pay­er, rental real estate income and expens­es are gen­er­al­ly report­ed on Sched­ule E when applic­a­ble.

The IRS instruc­tions also address sit­u­a­tions in which an indi­vid­ual owns only part of a rental real estate inter­est. In gen­er­al, the tax­pay­er reports the applic­a­ble share of the income and expens­es.

That con­cept is rel­e­vant to DST investors because the annu­al tax pack­age may pro­vide pro­por­tion­ate infor­ma­tion asso­ci­at­ed with the under­ly­ing prop­er­ty.

The pack­age might include rental income, mort­gage inter­est, real estate tax­es, oth­er prop­er­ty expens­es, depre­ci­a­tion, state infor­ma­tion, and oth­er tax items.

Your CPA then eval­u­ates those amounts and deter­mines how they belong on your return.

The DST Statement Is Not Your Completed Schedule E

This dis­tinc­tion is impor­tant.

A Grantor Trust Tax Infor­ma­tion State­ment is not the same thing as your com­plet­ed indi­vid­ual income-tax return.

The spon­sor does not know every­thing about your per­son­al tax sit­u­a­tion. The spon­sor gen­er­al­ly does not know all of your oth­er pas­sive activ­i­ties, your com­plete basis his­to­ry, your at-risk posi­tion, your pri­or sus­pend­ed loss­es, or every detail of a pre­vi­ous §1031 exchange. That is why the spon­sor pro­vides tax infor­ma­tion rather than prepar­ing your per­son­al Sched­ule E. Your CPA takes the infor­ma­tion sup­plied by the DST and places it in the con­text of your over­all return.

What Should Go in the CPA Handoff File?

I rec­om­mend cre­at­ing one orga­nized dig­i­tal fold­er for the CPA each tax year.

A use­ful hand­off pack­age may include:

• the com­plete cur­rent-year DST tax pack­age;
• all Forms 1098 or 1099 actu­al­ly received;
• depre­ci­a­tion and cost-seg­re­ga­tion sched­ules;
• orig­i­nal DST invest­ment or clos­ing records when rel­e­vant;
• Form 8824 if the DST was acquired through a §1031 exchange;
• relin­quished-prop­er­ty adjust­ed-basis records;
• pri­or depre­ci­a­tion sched­ules;
• state-spe­cif­ic infor­ma­tion sup­plied by the spon­sor;
• sale or dis­po­si­tion doc­u­ments for the year; and
• pri­or-year tax pack­ages when basis, depre­ci­a­tion, or sus­pend­ed-loss infor­ma­tion needs to car­ry for­ward.

The goal is not to over­whelm the CPA with unnec­es­sary paper­work.

The goal is to avoid leav­ing out a doc­u­ment that may affect the tax treat­ment.

For a long-term DST investor, pri­or-year records can be just as impor­tant as the cur­rent-year state­ment.

Why §1031 Investors May Need More Records

If you pur­chased the DST with new cash, the cur­rent-year pack­age may tell much of the sto­ry. If you acquired the DST through a §1031 exchange, the tax his­to­ry may reach back to the relin­quished prop­er­ty. That can mean your CPA needs pri­or Form 8824 infor­ma­tion, adjust­ed-basis records, and depre­ci­a­tion his­to­ry. This is one rea­son two investors with the same dol­lar amount in the same DST can have dif­fer­ent tax results.

The spon­sor may pro­vide the same prop­er­ty-lev­el tax infor­ma­tion, but each investor brings his or her own tax his­to­ry to the invest­ment.

Do Not Forget State Information

Anoth­er area that can be easy to over­look is state tax­a­tion. You might live in Flori­da and own a DST inter­est in a prop­er­ty locat­ed in anoth­er state. You might own sev­er­al DSTs with prop­er­ties in dif­fer­ent states. The annu­al pack­age may include state-spe­cif­ic sched­ules, with­hold­ing infor­ma­tion, or oth­er details that need to be eval­u­at­ed sep­a­rate­ly.

Do not assume that liv­ing in a state with­out an indi­vid­ual income tax means every state-relat­ed doc­u­ment in the pack­age can be dis­card­ed. Give those doc­u­ments to your CPA and let the tax pro­fes­sion­al deter­mine whether any addi­tion­al fil­ing is required.

What If the Package Shows a Loss?

An investor may look at the DST tax state­ment, see a rental loss, and ask:

“Can I deduct all of this?”

Not nec­es­sar­i­ly.

Rental real estate activ­i­ty is gen­er­al­ly sub­ject to pas­sive-activ­i­ty rules unless an excep­tion applies. At-risk lim­i­ta­tions, basis lim­i­ta­tions, and oth­er tax rules may also affect how much of a report­ed loss can cur­rent­ly be used. A loss shown in the DST pack­age is there­fore not auto­mat­i­cal­ly the same as a deduc­tion you can use against wages or unre­lat­ed invest­ment income.

Your CPA needs to eval­u­ate the loss in the con­text of your per­son­al return.

This is anoth­er rea­son the annu­al DST state­ment should be viewed as tax infor­ma­tion, not as a com­plet­ed tax cal­cu­la­tion for the investor.

A Simple Handoff Process

I think the eas­i­est approach is to keep the process con­sis­tent from year to year. We cov­ered this in a pre­vi­ous arti­cle, Part 1 A. When the DST doc­u­ments become avail­able, down­load them imme­di­ate­ly. Keep the com­plete orig­i­nal pack­age. Add the depre­ci­a­tion sched­ules, applic­a­ble 1099s, state infor­ma­tion, and any rel­e­vant basis or §1031 records. Then cre­ate a copy of those mate­ri­als for your CPA and trans­fer them through a secure por­tal or anoth­er secure method.

Do not send one doc­u­ment in Feb­ru­ary, anoth­er in March, and a third in April if you can avoid it. An orga­nized pack­age makes it much eas­i­er for your CPA to see how the pieces relate to one anoth­er.

A Good Question to Ask Your CPA

A use­ful ques­tion is:

“Have I giv­en you the com­plete DST pack­age, includ­ing the depre­ci­a­tion, state, basis, and pri­or §1031 records you need to pre­pare my return?”

That is real­ly the objec­tive. You do not need to deter­mine which line of Sched­ule E every DST num­ber belongs on. Your tax pro­fes­sion­al can do that. You need to make sure the tax pro­fes­sion­al has the infor­ma­tion required to make that deter­mi­na­tion.

The Bottom Line

The move from a DST tax pack­age to an indi­vid­ual tax return is a two-step process.

• The spon­sor pro­vides infor­ma­tion about the invest­ment.
• Your CPA deter­mines how that infor­ma­tion applies to you.

For an indi­vid­ual investor, rental real estate activ­i­ty may ulti­mate­ly be report­ed on Sched­ule E when applic­a­ble, but the CPA may need much more than the first page of the DST state­ment to pre­pare the return cor­rect­ly.

Good orga­ni­za­tion mat­ters, par­tic­u­lar­ly when §1031 exchanges, depre­ci­a­tion, state tax­a­tion, or pri­or-year loss­es are involved.

Investor/CPA Takeaway

The investor’s job is large­ly one of good record­keep­ing. Give your tax pro­fes­sion­al the com­plete infor­ma­tion need­ed to deter­mine how the DST activ­i­ty should be report­ed on your indi­vid­ual return.

In Part 10, the final arti­cle in our DST.EDU tax-pack­age series, we will look at:

Track­ing Tax Basis From DST Pur­chase Through Sale, §1031 Exchange or Inher­i­tance.

References

Inter­nal Rev­enue Ser­vice. Sched­ule E (Form 1040), Sup­ple­men­tal Income and Loss, and relat­ed instruc­tions.

Inter­nal Rev­enue Ser­vice. Form 8824, Like-Kind Exchanges, and relat­ed instruc­tions.

Educational Note

This arti­cle is intend­ed sole­ly for gen­er­al edu­ca­tion­al and infor­ma­tion­al pur­pos­es. It is not indi­vid­ual tax, legal, secu­ri­ties, or invest­ment advice. Tax report­ing can vary based on the invest­ment, own­er­ship struc­ture, pri­or exchanges, state law, tax basis, and indi­vid­ual cir­cum­stances. Investors should con­sult their CPA or oth­er qual­i­fied tax pro­fes­sion­al.

Delaware Statu­to­ry Trusts (DSTs) have become a notable part of com­mer­cial real estate invest­ing. As Al DiNi­co­la empha­sizes, a DST is a struc­ture, not an asset class, the focus should remain on the qual­i­ty of the under­ly­ing prop­er­ty and how it fits your goals.  DSTs are for accred­it­ed investors and car­ry risks, i.e. illiq­uid­i­ty, real estate mar­ket fluc­tu­a­tions, and spon­sor deci­sions. Con­sult your advis­er about suit­abil­i­ty, espe­cial­ly for §1031 exchanges. For more details, please con­tact:

• Al DiNi­co­la adnicola@fiduciarycm.com  
• Direct: 239 691 8098
• Sched­ule Appoint­ment

Advi­so­ry ser­vices are offered through Fidu­cia­ry CM, an SEC-reg­is­tered advis­er. Invest­ments involve risk and are not guar­an­teed. Always refer to offer­ing doc­u­ments for full risk dis­clo­sures. Delaware Statu­to­ry Trust (DST) invest­ments involve risks asso­ci­at­ed with com­mer­cial real estate own­er­ship and are not suit­able for all investors. These risks may include, but are not lim­it­ed to, loss of prin­ci­pal, illiq­uid­i­ty, ten­ant vacan­cy, financ­ing risk, inter­est rate fluc­tu­a­tions, prop­er­ty val­ue declines, eco­nom­ic and mar­ket con­di­tions, and risks asso­ci­at­ed with spon­sor and prop­er­ty man­age­ment deci­sions. Please refer to the applic­a­ble Prop­er­ty Pri­vate Place­ment Mem­o­ran­dum (PPM) for a com­plete dis­cus­sion of the risks and con­sid­er­a­tions spe­cif­ic to that offer­ing. Secu­ri­ties-relat­ed activ­i­ties, where applic­a­ble, are con­duct­ed through the author’s then-cur­rent reg­is­tered bro­ker-deal­er, mem­ber FINRA/SIPC. Cur­rent reg­is­tra­tion infor­ma­tion is avail­able through FINRA Bro­kerCheck. Past per­for­mance is not indica­tive of future results. Nei­ther the Reg­is­tered Rep­re­sen­ta­tive nor the Bro­ker-Deal­er can con­trol or guar­an­tee future deci­sions made by the DST spon­sor, asset man­ag­er, prop­er­ty man­ag­er, ten­ants, lenders, or oth­er third par­ties involved in the oper­a­tion of the prop­er­ty. Past per­for­mance is not indica­tive of future results. For edu­ca­tion­al pur­pos­es only; not tax, legal, secu­ri­ties, or invest­ment advice and not an offer or solic­i­ta­tion to buy or sell secu­ri­ties.